TL;DR: Pitch is expanding its scope and mission from exclusively supporting time-bounded governance tokens to encompassing time-bounded tokens of all forms. Today, countless protocols, from Curve to Balancer, incentivize loyal governance with ve-style systems. This paradigm should be elaborated to incentivize loyalty at the protocol’s core: liquidity.
Pitch’s expanded mission to support time-locked liquidity will be reflected in its new name, Hourglass. If you’re interested in trying it out, please DM!
The protocol’s existing services will remain fully functional, and its existing community channels (Discord, Telegram) will continue to support the past, present, and future of the DAO.
Pitch is excited to announce that the protocol is expanding its mission to become Hourglass, the Time Layer of Crypto.
The Summer
The Pitch protocol was launched in early 2022 to provide tooling for the “vote-escrow” (ve) token system, which was a pioneered by the Curve DAO as a method for incentivizing loyal users and liquidity. At a high level, the system is simple: users who lock their tokens in a protocol for a committed duration are given rewards and governance power; the longer a user commits, the more rewards and power she earns. This token model became the darling of DeFi in 2022, with protocols across blockchains implementing some flavor of it themselves.
One of the ve-token system’s best qualities is that lots of things can be built on top of it. One of its worst qualities is how complex the related projects can become.
From Curve’s simple time-lock program came Convex, a yield-maximizing, perma-locking behemoth that almost unilaterally governed the Curve DAO. Votium launched soon thereafter with a novel governance market to broker the CRV emissions schedule.
Then came Pitch, with its own set of bells and whistles to optimize this complex system of on-chain governance. The protocol first supported Frax with its own vote-incentives marketplace, then standing up a liquidity layer for their time-locked FXS token — pitchFXS. As momentum picked up, it iterated on the model to support other DAOs around DeFi, like Curve and Saddle.
The Winter
These time-lock mechanisms were designed to incentivize long-term crypto usage. In theory, if tokens are committed to the system, they can’t be withdrawn or sold. Therefore, one shouldn’t see sharp drops in TVL, which are particularly devastating to the macro ecosystem’s health.
For example, let’s say someone makes a long-term loan on Aave, using Uniswap as the on-chain exit liquidity for that loan. A few weeks go by, and for some reason, all the liquidity on Uniswap gets pulled. Without Aave even doing anything, that loan’s health has immediately deteriorated, since the lender will have a much harder time liquidating collateral without the Uniswap pool. As such, short-term liquidity on one protocol (Uniswap) directly impacts the long-term health of its surrounding ecosystem.
Unfortunately, even with the ve-token system, this scenario played out several times throughout 2022. What happened?
Total Value Locked Isn’t Locked
Curve is famous for incentivizing users to lock up their CRV. It’s not famous for incentivizing users to lock up their LP tokens, or the actual liquidity in the marketplace. Therefore, when times are uncertain, users might not be able to sell their CRV, but they can surely pull their stablecoins from the ecosystem.
No amount of secondary infrastructure around the vote-escrowed token system would solve this issue. This problem requires a fundamentally new paradigm of behavioral incentives in DeFi, where protocols incentivize locked TVL in addition to their underlying governance token.
At the time of writing, only protocol is known to have time-locked liquidity at scale ($100m+): Frax. However, while there is extraordinary tooling around liquid locked governance tokens (pitchFXS, etc.), locked TVL has almost no native support. If a user locks $100 USDC into the Frax ecosystem for a month, and then two weeks in, needs to offload her position for some reason, she cannot. As of today, these locked positions are non-transferrable. They’re ineligible as collateral. They’re not composable with the rest of the ecosystem.
This is about to change.
The Spring
Incentivizing time-locked governance tokens is one of DeFi’s most profound inventions in recent history. Incentivizing time-locked liquidity has the potential to be even greater. To reflect this expanded mission, the Pitch protocol will go by a new name: Hourglass.
Much of crypto’s real world utility (and market cap) is found in stablecoins like USDT and USDC, which are used as an international, 24/7 medium of exchange. Ensuring these aren’t rapidly withdrawn from crypto in times of fear is critical for building a system with longevity.
For example, one of locked liquidity’s most potent benefits, is bank-run insurance. SVB’s recent collapse had a number of contributing factors, one of them being that fractional reserve banking and traditional finance weren’t designed for instantaneous, coordinated withdrawals.
When FUD spread around Twitter, users withdrew their funds within minutes; when SVB asked for a loan against their balance sheet on Thursday afternoon, the Fed was closed. As our technology got faster and faster, our financial guardrails got weaker and weaker.
In other words, while multi-day wire transfers are clearly archaic and need improving, millisecond transfers are so powerful that they inspire a new set of problems. A robust, digitally-native economic system probably lives in a Goldilocks zone between the two: fast enough for practicality, but buffered enough for safety.
The Hourglass protocol is here to help build it.
Building infrastructure for a new cryptographic primitive — time-bound liquidity — will not be easy, so rallying the community together is important than ever. Feel free to reach out on Twitter, Discord, or Telegram to collaborate anytime.
There’s much more to come, so please stay tuned and join us on this exciting journey!